Dec 30, 2008

Business - India;DTH;Going National;Thinking Regional

Byravee Iyer

Earlier this month, at a press conference in Mumbai, Sun Direct announced its entry into the city and the rest of the country. “To begin with, we expect to have 35 to 40 per cent share of the market in Mumbai,” said chief operating officer Tony D’Silva at the launch. It has similar targets for the rest of the country. For instance, in another press conference in Kolkata a few days later, the company said it was looking to corner 40 per cent of the market.

Sun Direct, owned by SunTV Network’s Kalanithi Maran, is the dominant direct-to-home service provider in South India with 65 per cent share of the market. Even so, its market share target in Mumbai did sound a tad ambitious.

Reliance ADAG’s Big TV DTH, which started in August, claims to have a million subscribers and is aiming at a 40 per cent share of the all-India market by next year. Dish TV, the country’s first DTH service from the house of Zee, boasts of a 46 per cent share of the market. Tata Sky is not talking market share, but remains proud of its 3 million subscribers. AirTel, too, has big plans and targets. If everyone were to achieve their targeted market shares, the math will go haywire.

Given the ubiquitous nature of the business, and the fact that the government restricts exclusive content on DTH, these companies are hoping to get their targets right.

“In all the other markets, companies are able to offer something unique. Here, DTH players are competing not just with themselves, but also with the 14,000 cable operators. So from that perspective everyone is doing everything they can to drive subscriptions,” says an analyst.

Keeping that in mind, D’Silva is speaking of a regional language strategy. Overall, 70 per cent of the television-watching universe views 12-15 main channels and then a bevy of regional channels. This is particularly true of states such as Maharashtra, West Bengal, Punjab, Orissa and the four southern states.

Sun Direct conducted a study on consumer content consumption patterns and preferences across genres and regions. Based on the viewership data, the company is offering 36 add-on packages of the most viewed channels according to region, priced between Rs 6 and Rs 195. “We want subscribers to pay only for what they see,” says D’Silva.

Otherwise, too, Sun Direct’s pricing has a regional skew. Its packs are designed in a way that you can choose all the regional languages you want —an à la carte My Pack — to go with the Jumbo Pack buffet. Set-top boxes are free and there is a 600-strong call centre in all major regional languages.

Different strokes
It is a game in which every player is following its own course while chasing the same goal. Tata Sky, a predominantly Tier-1 player, is betting big on interactive services, including kids’ education, matrimony services, gaming, quiz, astrology and cookery. Dish TV is launching similar interactive services. “Besides, we’re the only DTH player in the country that provides live television in the sky (Kingfisher Airlines), vehicles (cars, buses, yachts, ships) and railways,” says Dish TV’s chief operating officer Salil Kapoor.

Big TV’s trump card is its movie library. “We have 32 channels showcasing 24/7 Hollywood, Bollywood and regional cinema,” says Sanjay Behl, group head, brand and marketing, Reliance Communications. Aiding the venture is the group’s entertainment business and its alliances with production houses Sony Pictures and Walt Disney.

Aware of the challenge, Sun Direct is ramping up its distribution, especially on the back of a less-than-perfect festive season, during which it ran out of stocks owing to snowfall and the Olympics in China (from where it sources set-top boxes).

“We are now available across the retail bandwidth, in telephone booths and even cycle shops. We had no stocks during the festive period so we could not capitalise on it. We’re hoping to make up for that now,” says D’Silva.

The afore-mentioned efforts have not come cheap. The company has so far spent Rs 2,000 crore on manpower, infrastructure and distribution. “At the current ARPU (average revenue per user) of Rs 90 — and if the rupee-dollar rate stabilises — we will break even in five to five-and-a-half years,” says D’Silva.

D’Silva is unperturbed by the massive distribution networks of Big TV and AirTel, which are part of groups that operate nation-wide mobile telephony. “They haven’t utilised their network so far,” he says.

Falling down
All DTH companies are sailing in the same boat — one that is rocking under the burden of Rs 2,500 crore in cumulative losses, thanks mainly to subsidised set-top boxes and low ARPUs. “The potential is huge, with 112 million television homes, of which 75 million have cable connections,” says Smita Jha, media consultant at PricewaterhouseCoopers. “This is similar to an infrastructure business, which requires massive investment and long gestation periods. Initially, discounts are essential as the DTH players are competing with 14,000 cable operators.”

The game could be anyone’s. “None of these players offer anything unique. Consumers are only going to pay for niche channels. So a regional approach won’t matter much. What really matters is the price point. And Sun’s price point will appeal to consumers,” says an analyst who didn’t want to be named.

Sun is offering free set-top boxes. Not surprisingly, competitors have made their products more affordable. Tata Sky has slashed the price of its set-top box from Rs 3,000 in February this year to Rs 1,499. “What’s more, now we have a package for as low as Rs 99 with 54 channels and all our prices are inclusive of taxes, unlike that of the other players,” says Vikram Mehra, chief marketing officer, Tata Sky.

Dish TV’s set-top box is priced at Rs 1,490 with packs ranging from Rs 99 to Rs 275 a month.

Some, however, point out that even though these companies subsidise set-top boxes, they are bundling their packages with other charges. Sun Direct is charging an installation fee of Rs 1,000.

D’Silva sees things differently. “As we are charging channels à la carte, we can afford to subsidise the set-top box. One can either subsidise the channels or the set-top box, and we have chosen to do the latter. We believe DTH is not a rich man’s product. It is a product for everyone,” he says.

That perhaps explains why, despite the huge market share in the south, Sun Direct’s ARPU languishes at Rs 90, well short of the market average of Rs 200.

D’Silva’s got a plan to address that. À la carte packages, he hopes, would push the ARPU up to Rs 125-130 in six months. Further, the company hopes to add 10,000 new customers a day and, by 2009, have at least 3 million subscribers.

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